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What is RR Forex and how to use the Risk Reward Ratio in trading
Making investment or trading decisions in the Forex market requires various analytical tools, and one of the most important is RR Forex or Risk Reward Ratio, which is the ratio comparing expected profit to potential loss. This article will help you understand how crucial RR Forex is in managing each trade.
Why is RR Forex Important to Know
First, understand that RR Forex is a key indicator that helps traders determine whether the potential profit is worth the risk they have to accept. Often, traders focus only on high profit opportunities but forget to consider how much they need to risk.
Suppose there are two trading scenarios:
Without calculating RR, it’s difficult to decide which one to choose. But when using the RR Forex system, it becomes easier to see the picture clearly.
How to Calculate RR Forex
Basic formula: